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With the government sitting on what seems like gazillions of dollars in debt, concerns about a looming inflation crisis are swirling about in many an investor’s mind. That’s where Treasury Inflation-Protected Securities (TIPS) exchange traded fund (ETFs) come in handy as a bet against potential rising inflation.

Green doesn’t necessarily rule out deflation all together, but he suggests hedging one’s bet by diversifying into other asset classes. Investors may use gold and silver, but they are a less than perfect hedge, remarks Green. [How TIPS Work.]

TIPS are less volatile than traditional bonds and a good diversifier, additional benefits include:

Interest. TIPS pay interest every six months like any other regular Treasury bond. But TIPs get the added benefit of a higher principal each year by the amount of inflation as measured by the consumer price index (CPI). Semi-annual interest payments also increase alongside inflation.

Tax perks. The interest is exempt from state and local income taxes, but not federal tax.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.